How Pa.'s liquor system encourages people to break the law

HARRISBURG — The Keystone State’s Prohibition-era liquor laws might encourage some residents to buy alcohol from other states and bring it back to Pennsylvania.

It used to be called bootlegging, which refers to the illegal manufacture, sale or distribution of alcohol. Yet Pennsylvania has a criminal statute that still prohibits the practice.

The past few weeks have featured rampant discussion on the pros and cons of the state’s alcoholic beverage control system as the state House passed Bill 790, which would sell off the state system and create a private liquor business.

Peppering the discussion was talk of “border bleed” — Pennsylvanians who drive to other states to buy alcohol. Those who get caught are hit with fines of $10 per container of beer or malt beverage, and $25 for other types of alcohol. The goods are also confiscated.

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But the likelihood of getting hit with these fines is slim. Major John Lutz, who runs the Pennsylvania State Police Bureau of Liquor Control Enforcement, said enforcing the out-of-state-purchase laws is less of a priority than it was several years ago.

The main reason, Lutz said, is the bureau underwent staffing cuts and had to re-prioritize its details. Essentially, the bureau doesn’t enforce the law for individuals — Pennsylvanians-as-bootleggers are generally left alone.

“We’re not looking for people buying two bottles on the way to the shore,” he said.

If there is a crackdown, the bureau is more concerned with “a loaded pickup truck stacked with wine and spirits,” or a licensee who should be buying wholesale out of the state system.

But if the state system was sold and licensees could buy products from the private sector, that issue would no longer be a concern. HB 790 removes the criminal penalties for out-of-state purchases.

Lutz said the most obvious form of border bleed happens in Delaware, right next door to Delaware County, which has no sales tax.

“People are going down there to do lots of things,” he said. “I don’t think (border bleed) is being done for the purpose of selection, I think it’s being down for the pure economics of it, if people can save money.”

A 2011 online survey from the Pennsylvania Liquor Control Board examined where Pennsylvanians buy their booze. While 55 percent of respondents exclusively bought alcohol in-state, 32 percent were “opportunistic buyers,” who might buy alcohol out-of-state, if convenient. Another 8 percent were “destination buyers,” or people who make specific trips out-of-state to buy alcohol but also shop at state stores. The remaining 5 percent exclusively purchased alcohol out-of-state.

Privatization supporters often point to border bleed as evidence that consumers are dissatisfied with the state store system, and they argue a private system would recapture lost sales tax. The state levies a total 24 percent tax on alcohol, 18 percent from the Johnstown flood tax and a 6 percent sales tax.

During a meeting on the bill, House Appropriations Committee analyst Ritchie LaFaver said the state could see as much as $17 million from these taxes if the state system was fully divested.

“Assuming that those sales are going to be brought back into the commonwealth, you’re actually going to see an increase in sales taxes because there’s more sales,” he told lawmakers.

The Public Finance Management report from 2011 commissioned by the Corbett administration suggests bootlegging behavior would end with privatization. It says PLCB’s lost sales to other states could be anywhere from 10 percent to 30 percent of total sales.

“If the private system is able to recapture a portion of these sales it should improve system profitability and create jobs to replace some of those displaced by PLCB store closures,” reads the report.

Wendell Young IV, president of the United Food and Commercial Workers Local 1776 representing the state store employees, testified before lawmakers, saying the reasons Pennsylvanians cross the border won’t change after privatization.

“People drive to Delaware to shop for everything — clothing, furniture, food and, yes, alcohol. Why? Because there are no state taxes. That will not change,” Young told lawmakers in 2011. “Some people might drive to Maryland, but that’s because Maryland has a very modest excise tax on liquor. That will not change.”

But if lawmakers eliminated the criminal statute one way or the other, these border-crossing Pennsylvanians wouldn’t be bootleggers. They would simply be consumers.